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Middle East and Central Asia > Saudi Arabia

You are looking at 1 - 1 of 1 items for :

  • Type: Journal Issue x
  • Bureaucracy; Administrative Processes in Public Organizations; Corruption x
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Cover IMF Working Papers
Remittances and Institutions: Are Remittances a Curse?
Jihad Dagher
,
Mr. Ralph Chami
,
Mr. Peter J Montiel
, and
Mr. Yasser Abdih
This paper addresses the complex and overlooked relationship between the receipt of workers' remittances and institutional quality in the recipient country. Using a simple model, we show how an increase in remittance inflows can lead to deterioration of institutional quality - specifically, to an increase in the share of funds diverted by the government for its own purposes. Empirical testing of this proposition is complicated by the likelihood of reverse causality. In a cross section of 111 countries we document a negative impact of the ratio of remittance inflows to GDP on domestic institutional quality, even after controlling for potential reverse causality. We find that a higher ratio of remittances to GDP is associated with lower indices of control of corruption, government effectiveness, and rule of law.
Keywords:
WP; private income